Oil price exceeds $71 as Omicron panic slightly eases

Oil prices rose by more than US$1 per barrel on Monday to more than US$71. The hope that the Omicron coronavirus variant may cause the mildest symptoms has boosted higher-risk assets. The prospect of an imminent increase in Iranian oil exports looks unlikely.

To alleviate Omicron’s concerns, South Africa reported that the cases there had only mild symptoms. The top US infectious disease official said that it does not appear to be of great severity so far.

At 0920 GMT, Brent crude oil rose 1.77 US dollars, or 2.5%, to 71.65 US dollars, while US West Texas Intermediate crude oil rose 1.69 US dollars, or 2.6%, to 67.95 US dollars. Both benchmarks fell for the sixth consecutive week last week.

The easing of Omicron’s concerns also boosted European stock markets. At the same time, safer havens such as bonds gave up some recent gains.

This year, Brent crude oil has risen by 38%. It received support from production cuts led by the Organization of the Petroleum Exporting Countries and its allies (i.e., OPEC+) and a rebound in demand. However, it has fallen from a three-year high of more than $86 in October.

OPEC+ decided last week to continue to increase its monthly supply in January by 400,000 barrels per day, even after Omicron’s concerns caused prices to fall.

On Sunday, the official January price of all crude oil grades that Saudi Arabia will sell to Asia and the United States increased by 80 cents from the previous month.

After the indirect negotiations between the United States and Iran to rescue the 2015 Iran nuclear agreement broke down last week, the prospect of increased Iranian oil exports has also boosted oil prices.